Please select suitable financing options when the company preparing for expansions, Describe the option and relate the option, how the effect of this option to valuation options, why choosing this option, whats the advantages and disadvantages. (Please related to the case and discuss the point)
Case Study DALMA IT Software Consultancy and Solutions DALMA is an IT Software Consultancy and Solutions business. The company has raised 150K from friends and family in 2011 and has started developing its services to deliver solutions of any complexity that require outstanding knowledge of networks, IT, cloud and data engineering. DALMA IT Software Consultancy and Business Solutions is a business that is growing fast. Experiencing 120% year-on-year growth since 2015, they were about to close their largest contract to date worth 1,000,000 with a company who had spun out of a very well-known business within the Financial Services sector. Their clientele is composed of multinational firms, and have entered into three or more-year contracts without break clauses. Whilst growing explosively is appealing to venture capital and private equity, the business felt the pressure on their cash flow as they aimed to deliver their growth. The business had estimated a working capital need of at least 250,000 over the next 12 months in order to fund this expansion Given the credit quality of their clients, the growing contract book and each contract being safe for a minimum of three years, achieving contract finance would have been easy and scalable. However, the directors were extremely price sensitive and didn't want to borrow more than was absolutely necessary. Not wanting to give value away to future equity investors they sought to bridge the cashflow gap with working capital in order to land a few more contracts prior to the equity fund raise. Bridge financing is a type of short- term financing, typically taken out for a period of few weeks to 1-2 years, pending the arrangement of larger or longer-term financing. The overall business had a very compelling growth story and trajectory which made finding interested lenders a walk (or should I say run) in the park. On the face of it, arranging finance for a growing and profitable business sounds easy. However, this is not always the case. Please select a suitable innovative financing option(s) for DALMA IT Software Consultancy and Business Solutions. Please describe and explain your selection. Relate your financing option(s) to the development phases of the venture, aligning your option's attributes to those required by the venture at each stage. (Consider that venture is entering into a maturity stage). Consider the agreements required, the trade-off between owners and financiers, the role of accounting in your specific financing process, legislative context and other considerations that may be relevant to both owners and financiers. Consider and explain the valuation issues associated with your financing option. Compare your financing option(s) to alternative financial options. How can you assure that your financing option(s) do not dilute ownership incentive to an unreasonable level? Marking Criteria: 1. Identification of a genuinely innovative finance alternative. 2. Application of the finance alternative to specific venture phases through aligning attributes of the phases with attributes of the finance. In depth consideration of the positive and negative effects of your selected finance option over time. 3. Full and proper description of the finance alternative including primary and secondary impacts for the venture and for the owners. Address change in finance options, valuation changes; provide advice with respect to the chosen finance option and other alternative finance options using a strengths and weaknesses approach. 4. Professional report presentation and depth of research. Correct UOW Harvard referencing. Presentation format, the use of professional English language, appropriate and relevant use of numbers and appropriate referencing. Case Study DALMA IT Software Consultancy and Solutions DALMA is an IT Software Consultancy and Solutions business. The company has raised 150K from friends and family in 2011 and has started developing its services to deliver solutions of any complexity that require outstanding knowledge of networks, IT, cloud and data engineering. DALMA IT Software Consultancy and Business Solutions is a business that is growing fast. Experiencing 120% year-on-year growth since 2015, they were about to close their largest contract to date worth 1,000,000 with a company who had spun out of a very well-known business within the Financial Services sector. Their clientele is composed of multinational firms, and have entered into three or more-year contracts without break clauses. Whilst growing explosively is appealing to venture capital and private equity, the business felt the pressure on their cash flow as they aimed to deliver their growth. The business had estimated a working capital need of at least 250,000 over the next 12 months in order to fund this expansion Given the credit quality of their clients, the growing contract book and each contract being safe for a minimum of three years, achieving contract finance would have been easy and scalable. However, the directors were extremely price sensitive and didn't want to borrow more than was absolutely necessary. Not wanting to give value away to future equity investors they sought to bridge the cashflow gap with working capital in order to land a few more contracts prior to the equity fund raise. Bridge financing is a type of short- term financing, typically taken out for a period of few weeks to 1-2 years, pending the arrangement of larger or longer-term financing. The overall business had a very compelling growth story and trajectory which made finding interested lenders a walk (or should I say run) in the park. On the face of it, arranging finance for a growing and profitable business sounds easy. However, this is not always the case. Please select a suitable innovative financing option(s) for DALMA IT Software Consultancy and Business Solutions. Please describe and explain your selection. Relate your financing option(s) to the development phases of the venture, aligning your option's attributes to those required by the venture at each stage. (Consider that venture is entering into a maturity stage). Consider the agreements required, the trade-off between owners and financiers, the role of accounting in your specific financing process, legislative context and other considerations that may be relevant to both owners and financiers. Consider and explain the valuation issues associated with your financing option. Compare your financing option(s) to alternative financial options. How can you assure that your financing option(s) do not dilute ownership incentive to an unreasonable level? Marking Criteria: 1. Identification of a genuinely innovative finance alternative. 2. Application of the finance alternative to specific venture phases through aligning attributes of the phases with attributes of the finance. In depth consideration of the positive and negative effects of your selected finance option over time. 3. Full and proper description of the finance alternative including primary and secondary impacts for the venture and for the owners. Address change in finance options, valuation changes; provide advice with respect to the chosen finance option and other alternative finance options using a strengths and weaknesses approach. 4. Professional report presentation and depth of research. Correct UOW Harvard referencing. Presentation format, the use of professional English language, appropriate and relevant use of numbers and appropriate referencing
